With passive funds outperforming their counterparts and delivering exceptional returns in 2024, experts recommend that one can look at creating a portfolio with a mix of active and passive funds in 2025 as many smart beta/ factor based passive funds have shown strong and consistent outperformance.“There have been many active funds which have shown strong and consistent outperformance over the long term. One can look at creating a portfolio with a mix of active and passive funds. Many smart beta/factor based passive funds have shown strong and consistent outperformance and that is something I would recommend investors to look at currently,” recommends Rushabh Desai, Founder of Rupee With Rushabh Investment Services.

Also Read | Year-ender 2024: Mutual fund categories that created most of the buzz this year

Among the passive funds, Mirae Asset NYSE FANG+ETF FoF has offered the highest return of around 86.45% in 2024. Motilal Oswal Nasdaq 100 FOF and Mirae Asset NYSE FANG+ ETF offered 56.20% and 55.91% returns respectively in the same period.

Bạn đang xem: Active for passive: Why it’s time for investors to give passive funds their due in 2025

Motilal Oswal BSE Healthcare ETF and Aditya Birla SL Nifty Healthcare ETF posted a return of around 43.45% and 41.22% respectively in 2024. Tata Nifty India Digital ETF delivered a return of around 34.62%, followed by Mirae Asset Hang Seng TECH ETF FoF which gave 34.31% in the same time period.

Among the active funds, Motilal Oswal Midcap Fund delivered the highest return of around 57.47% in 2024. HDFC Pharma and Healthcare Fund and ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund offered 49.77% and 47.18% returns respectively in the said period. Motilal Oswal ELSS Tax Saver Fund delivered 46.55% return in 2024.

Xem thêm : Best gilt mutual funds to invest in December 2024

After passive funds performed exceptionally well in comparison to active funds, many mutual fund investors will think of shifting their focus to passive funds. The expert recommends that investors should not completely shift their focus to passive funds as the launch of many indices and with rotating and cyclical out/under performance in active funds has made investors gain attraction in passive funds.

“There was a time when active funds dominated the mutual funds industry but with the launch of many indices offering low cost and simplicity and with the rotating and cyclical out/under performance in many active funds has made investors gain more attraction towards passive funds. Today, there is space for both active and passive funds in one’s portfolio thus I wouldn’t suggest investors to completely shift to passive funds,” mentioned Desai.

In 2024 (till November), the maximum number of launches were passive funds. Fund houses launched around 76 index funds and 41 other ETFs in 2024. These index funds and ETFs collected Rs 11,896 crore and Rs 1,438 crore respectively in the mentioned time period.

Also Read | Index, smallcap or global funds? Here’s how mutual fund investors can plan for 2025

According to the monthly data released by Association of Mutual Funds in India (AMFI), in 2024 till November (last available data) index funds were launched in every month with highest being in October. Around 17 index funds were launched in October.

The important thing to know here is why fund houses are focusing on launching more passive funds? Why are they coming up with so many passive fund NFOs?

Xem thêm : Is BFRAX a Strong Bond Fund Right Now?

According to Desai, the fund houses are focused to launch new funds and fill their basket of offerings with different products. Mutual funds are allowed to launch only one active fund in each category. So to increase the assets under management of the fund house, new passive funds are launched with different variants.

“It is very natural for AMCs to grow their business and one of the ways to do that is by launching new products and by filling their baskets with different products there by helping them increase their revenue,” mentioned Desai.

One should always consider risk appetite, investment horizon, and goal before making an investment decision.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on [email protected] alongwith your age, risk profile, and twitter handle.